Skechers U.S.A., Inc. (SKX)

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Skechers USA Inc. (SKX)

Q4 2012 Results Earnings Call

February 13, 2013 4:30 PM ET


David Weinberg - Chief Operating Officer and CFO


Jeff Van Sinderen - B. Riley & Company

Scott Krasik - BB&T Capital Markets

Sam Poser - Sterne, Agee

Chris Svezia - Susquehanna Financial Group

Corinna Freedman - Wedbush Securities



Greetings. And welcome to the Skechers USA, Inc. Fourth Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions)

As a reminder, this conference is being recorded. At this point, I would like to turn the conference over to Skechers. Please go ahead.

Unidentified Participant

Thank you everyone for joining us on Skechers’ conference call today. I will now read the Safe Harbor statement. Certain statements contained herein, including without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the company or future results or events may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended.

Such forward-looking statements involve known and unknown risks, including but not limited to, global, national and local economic, business and market conditions in general and specifically as they apply to the retail industry and the company. There can be no assurance that the actual future results performance or achievements expressed or implied by such forward-looking statements will occur.

Users of forward-looking statements are encouraged to review the company’s filings with the U.S. Securities and Exchange Commission, including the most recent annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all other reports filed with the SEC as required by Federal Securities laws for a description of other significant risk factors that may affect the company’s business, results of operations and financial conditions.

With that, I would like to turn the call over to Skechers’ Chief Operating Officer and Chief Financial Officer, David Weinberg. David?

David Weinberg

Thank you for joining us today to review Skechers’ fourth quarter and year end 2012 results. Net sales for the fourth quarter were $395.6 million and earnings from operations were $8 million. Net income for the fourth quarter was $4 million and diluted earnings per share were $0.08. For the year, net sales were $1.560 billion, earnings from operations were $22.3 million, net income was $9.5 million and diluted earnings per share were $0.19.

Our fourth quarter 2012 sales increased by 39.7% over the same period last year. This was the result of growth in all our revenue channels domestic wholesale, international and our company-owned retail business. We are particularly pleased with the 72% gain in our domestic wholesale business.

Along with a strong gains in our domestic wholesale business, additional fourth quarter highlights include, a 30% increase in our international business, including 17% growth in our international distributor business and a 40.5% increase in international subsidiary and joint venture sale, a 16.2% increase in domestic and international retail sales, a 39.4% increase in e-commerce sales, a 9.8% increase in price per pair and 56.8% increase in pairs shipped within our domestic wholesale business, with triple-digit growth in our women’s and double-digit growth in our men’s and kids divisions, improved gross margins of 42.6%, domestic and international wholesale backlog improved by over 20%, excluding legal settlements reduce G&A expenses by $18.7 million.

Financial highlights for the year include strong balance sheet with $325.8 million in cash or approximately $6.48 per share and a return to profitability with net earnings of $9.5 million.

Also in the year, we grew our existing product divisions with new lines for men, women, juniors and kid, and firmly established our Skechers Performance division with several new product introductions and earned eight awards from top [lending] publications in the United States and several countries around the world.

With Meb wear and GOrun we had our first elite athlete competing Skechers Performance footwear at the Olympic this past summer. He has achieved several personal best in Skechers GOrun and his performance at the London Games landed him in the prestigious position of being the fastest American marathon runner. We believe our product is on target. Our marketing is effective and our operations are more efficient.

Our improved focus and execution in 2012 translated into a strong fourth quarter and as we continue to grow our businesses around the world, we believe the positive momentum will continue and we will experience a strong first half of 2013.

In our domestic wholesale business, fourth quarter sales increased 72% or $69.9 million over the prior year. This was due to strong sales in our men’s, women’s and kids line, and a 56.8% increase in pairs shipped. This growth also came despite off-price sales in our fashion brands in the fourth quarter of 2011.

Excluding our fashion lines, Skechers brands were up $73.4 million or 81.6%. Along with double-digit improvements in our women’s active, women’s and men’s USA, men’s sport, kids and work lines, we experienced triple-digit growth in our women’s sport in our charitable line BOBS from Skechers. The continued sales growth with BOBS has resulted in more than 3 million pairs of shoes donate to children in need around the world.

We launched our performance division in the fourth quarter of 2011 with one-style Skechers GOrun, a year later with numerous lines under our performance division including Skechers GOwalk and Skechers GOrun Ride and Skechers GOrun 2, the goal platform has become a key growth category with triple-digit gains in the fourth quarter.

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